Volume 2, Issue 5a

AVIATION HAPPENINGS WINTER 2016-2017

In this issue:

Court Dismisses State Law Negligence Claim Against Carrier as Preempted by Montreal Convention

Update on AVCO Corporation v. Sikkelee and Preemption Under the Federal Aviation Act

California Court Expands Specific Personal Jurisdiction

Specific Jurisdiction Found Over Out-of-State Defendants Based on Many Individually Insignificant Contacts

District Court Finds Registering to do Business Sufficient to Support Personal Jurisdiction

Accident That Occurs While Flying Does Not Create Personal Jurisdiction in New York

Don’t Believe the Hype – Part 107 Doesn’t Make Drone Operations Easy for Everyone

Helicopter Lessor Invokes Federal Preemption to Escape Liability for State Law Claims

Court Dismisses State Law Negligence Claim

Against Carrier as Preempted by Montreal

Convention Stephen J. Shapiro, Philadelphia

sshapiro@schnader.com

In a case litigated by Schnader Harrison Segal &

Lewis LLP, the United States District Court for the

Eastern District of Pennsylvania recently dismissed a

state law negligence claim as preempted by the

Montreal Convention. In Raub v. US Airways, Inc.,

No. 16-1975 (E.D. Pa.), the plaintiff traveled from

Cancun, Mexico to Philadelphia, Pennsylvania aboard

a flight that encountered severe turbulence.

The plaintiff alleged that her seatbelt failed to

restrain her and that, as a result, she was thrown

upward out of her seat and struck her head on the

overhead compartment.

The plaintiff’s complaint against U.S. Airways

asserted a state law negligence claim against U.S.

Airways, which moved to dismiss the claim as

preempted by the Montreal Convention. In her

opposition to the motion, the plaintiff conceded that

the Montreal Convention governed her suit, but

nevertheless argued that the Montreal Convention

does not preempt state law and, therefore, she

should be permitted to pursue her negligence claim

against the airline.

Plaintiff first relied on cases finding that the

Montreal Convention does not completely preempt

state law claims so as to support removal. Because

removal was not at issue, however, these cases were

deemed by the court to be irrelevant.

Plaintiff also relied on Zicherman v. Korean Air Lines

Co., 516 U.S. 217 (1996), and its progeny, which held

that “auxiliary issues” not addressed by the

Warsaw/Montreal Convention are governed by

domestic law. Because the issue of what causes of

action are permitted in a Convention case is not an

auxiliary issue, however, Zicherman also was

deemed inapplicable.

The Raub Court granted the airline’s motion and

dismissed plaintiff’s state law negligence case.

Raub v. US Airways, Inc., No. 16-1975 (E.D. Pa.)

Update on AVCO Corporation v. Sikkelee

and Preemption Under the Federal

Aviation Act Julie Randolph, Philadelphia

jrandolph@schnader.com

The United States Supreme Court on November 28,

2016 issued its decision denying certiorari in AVCO

Corporation v. Sikkelee, in which petitioner AVCO

sought review of the Third Circuit’s decision in

Sikkelee v. Precision Airmotive Corporation, which

held that the Federal Aviation Act (the “Act”)

preempts the “field of aviation safety” with regard

to “in-air operations,” but does not preempt aircraft

products liability claims. 822 F.3d 680 (3d Cir. 2016).

The Third Circuit’s holding largely parted from the

view of the Federal Aviation Administration, which

submitted a letter brief to the Third Circuit opining

that the Act impliedly

preempts the field of aviation

safety with respect to sub-

stantive standards of safety,

that federal standards govern

state tort suits, and that

ordinary conflict preemption

principles govern whether an

FAA-issued type certificate

preempts a design defect

claim.

After the Third Circuit issued its opinion, AVCO

Corporation (through its Lycoming Engines division)

filed a petition for rehearing by the Third Circuit en

banc, which the court denied. On September 6,

AVCO filed a petition for writ of certiorari with the

Supreme Court of the United States. After

describing Congress’s long interest in regulating the

aviation industry and describing the FAA certifica-

tion process, AVCO presents three main

arguments for granting its petition: (1) the Third

Circuit’s opinion has deepened an existing circuit

split on the scope of field preemption under the Act;

(2) the Third Circuit made an “arbitrary” distinction

between “in-air operations” and other aspects of

aviation safety, misinterpreting the Act and its

intention to preempt the entire field; and (3) this is

an exceptionally important question that warrants

the Supreme Court’s review.

Four amicus briefs were filed in support of AVCO’s

petition. The Aircraft Owners and Pilots

Association’s brief describes the FAA’s “pervasive”

regulatory scheme and how state-law duties would

interfere with that scheme, and also argues that the

Third Circuit’s distinction between in-air operations

and the rest of the aviation safety field is artificial

and unsupportable. The General Aviation

Manufacturers Association, Inc.’s brief reviews the

FAA certification process, notes that conflict

preemption analysis alone would not solve the issue

of states’ differing standards of care, and explains air

flight’s importance in the United States. The brief for

Aerospace Industries Association of America, Inc.

discusses Congress’s interest in federal aviation

safety, the importance of aviation to the United

States economy, and the painstaking nature of FAA

approval. Finally, the Atlantic Legal Foundation and

New England Legal Foundation’s brief examines the

circuit split and criticizes the Third Circuit’s

distinction between in-air

operations and other aviation

safety areas.

Sikkelee’s opposition to

certiorari emphasized the

FAA’s delegation of responsi-

bility to manufacturers’

designees and noted that

manufacturers are permitted

to make certain design chang-

es without FAA approval.

Sikkelee further argued that: (1) there is no circuit

split – or at least, none that is implicated here –

because no circuit court has held that the scope of

field preemption under the Act encompasses

general aviation design defect cases; (2) the Third

Circuit correctly performed its preemption analysis;

and (3) this case is not the proper vehicle to address

the scope of federal preemption under the Act.

AVCO’s reply brief stresses the great importance of

the question before the Court, reiterates that a

circuit split does, indeed, exist, and attacks the

merits of Sikkelee’s substantive arguments.

Unfortunately, the Supreme Court’s declination of

certiorari means that the Third Circuit’s decision will

stand. This is a disappointing blow to aircraft

product manufacturers, which now face potential

liability for designs that were approved by the FAA.

AVCO Corporation v. Sikkelee, Supreme Court Dkt.

No. 16-323.

California Court Expands Specific

Personal Jurisdiction Lilian M. Loh, San Francisco

lloh@schnader.com

Two years ago, the U.S. Supreme Court substantially

curtailed forum shopping by limiting general

jurisdiction against corporate defendants. (Daimler

AG v. Bauman, 134 S. Ct. 746 (2014)). The California

Supreme Court’s recent decision in Bristol-Meyers

Squibb Co. v. Super. Ct. has the potential to reverse

many of the gains from Daimler. In Bristol-Myers

Squibb, 86 California residents and 592 nonresidents

alleged adverse consequences from using BMS’s

drug Plavix.

The plaintiffs asserted two arguments in support of

personal jurisdiction. First, they argued that BMS

consented to general jurisdiction in California by

registering to do business there, an issue the

Supreme Court explicitly stated in Daimler that it

was not addressing. The Bristol-Myers Squibb court

rejected this argument. Relying on pre-Daimler

California Court of Appeals opinions, the court held

that the “designation of an agent for service of

process and qualification to do business in California

alone are insufficient to permit general jurisdiction.”

The court added, “[i]n assessing BMS’s California

business activities in comparison to the company’s

business operations ‘in their entirety, nationwide,’

we find nothing to warrant a conclusion that BMS is

at home in California."

The plaintiffs’ second argument was that because the nonresidents’ claims were similar to those of the resident plaintiffs, personal jurisdiction existed over the non-resident plaintiffs even though they did not purchase or use (and thus were not harmed by) Plavix in California.

A 4-3 majority found that California courts have specific jurisdiction over the claims of the almost 600 out-of-state plaintiffs even though the actions giving rise to their claims occurred entirely outside California. The majority found that because both “the resident and nonresident plaintiffs’ claims were based on the same allegedly defective product and the allegedly misleading marketing and promotion of that product, which allegedly caused injuries in and outside the state,” there was a substantial connection. Further, “BMS’s nationwide marketing, promotion, and distribution of Plavix created a

substantial nexus between the nonresident plaintiffs’ claims and the company’s contacts in California concerning Plavix.” In other words, specific jurisdiction applied to BMS because it marketed and distributed Plavix nationwide. Additionally, despite the fact that “there is no claim that Plavix itself was designed and developed in [BMS’s California research and laboratory] facilities,” the Bristol-Myers Squibb court found that these facilities were related to the plaintiffs’ claims and this research and development activity connected the nonresident plaintiffs' claims to BMS and California.

As the Bristol-Myers Squibb dissent correctly noted, “[s]uch an aggressive assertion of personal jurisdic-tion is inconsistent with the limits set by due pro-cess.” BMS filed a petition for certiorari with the U.S. Supreme Court on October 7, 2016 seeking review of the California Supreme Court’s decision. Product liability defendants and counsel will be following the petition closely to monitor whether the Supreme Court grants the petition. A number of interested parties have already filed amicus briefs, and this trend is likely to continue for both sides.

Bristol-Myers Squibb Co. v. Super. Ct., 377 P.3d 874 (Cal. 2016), Petition for Cert. filed (U.S. Oct. 11, 2016) (No. 16-466).

Specific Jurisdiction Found Over Out-of-State Defendants Based on Many Individually Insignificant Contacts Edward J. Sholinsky, Philadelphia esholinsky@schnader.com

In Peregrine Falcon LLC v. Piaggio Am., Inc., an Idaho federal district court held that it had specific jurisdiction over the manufacturer of an aircraft despite the fact that the aircraft was not delivered, nor did it crash, in Idaho. In a somewhat complex transaction, CBA, a Texas-based company, entered into a contract to purchase a custom-made plane from Piaggio, a Delaware corporation headquartered in Florida.

At the same time, CBA entered a contract with defendant Fast Enterprises, LLC, a New York company headquartered in Colorado, for the sale of the Piaggio-manufactured plane, and assigned the sale to the plaintiff, an Idaho-based trust.

The assignment agreement was governed by Idaho law, and all of the defendants knew that the plaintiff was going to be the ultimate purchaser of the plane.Piaggio experienced manufacturing delays, and arranged flight coverage in and out of Idaho for Fast employees, to arrange pilot selection for those flights, and to locate hangars in Idaho. Eventually, Piaggio delivered the plane to CBA in Kansas, which, in turn, delivered the plane to Fast in Texas, where the plaintiff took delivery of it.

The plane ultimately malfunctioned and crash landed in Illinois.

After finding that Piaggio and CBA were “clearly not” subject to general jurisdiction in Idaho, the Court addressed the issue of specific jurisdiction. The Court held that Piaggo’s and CBA’s contacts with Idaho “were not random, fortuitous, or attenuated,” and, therefore, they were subject to the Court’s specific jurisdiction.

In deciding to exercise jurisdiction, the Court weighed heavily that Piaggio entered into the manufacturing contracts knowing that an Idaho company was the ultimate purchaser and had originally agreed to deliver the aircraft in Idaho. Additionally, during the delays, Piaggio worked with CBA to arrange flight coverage for Fast and arranged these flights with an Idaho-based charter company.

Finally, the Court found that both Piaggio and CBA emailed Fast’s Idaho-based employees about the sale, and that Piaggio knew the plane was going to be used primarily in Idaho, and received payments for the plane from Idaho.

While each of the above factors in isolation may not have been enough to confer specific jurisdiction over Piaggio, the court found that when taken together they showed that Piaggio purposefully established minimum contacts sufficient to establish jurisdiction.

The takeaway from Peregrine Falcon is that, even under the post-Daimler and Goodyear personal jurisdiction regime, attenuated contacts with a plaintiff’s home state can establish specific jurisdiction in a tort and contract case when manufacturers and sellers know that the product will ultimately end up in that state.

Peregrine Falcon LLC v. Piaggio Am., Inc. (D. Idaho Aug. 24, 2016. 2016 U.S. Dist. LEXIS 115083

District Court Finds Registering to do Business Sufficient to Support Personal Jurisdiction Danielle T. Morrison, Philadelphia dmorrison@schnader.com

In the wake of the United States Supreme Court’s

decision in Daimler AG v. Bauman, courts continue

to face the issue of whether a corporation’s

registration to do business within a state constitutes

consent to general personal jurisdiction. Finding

that it does, the Eastern District of Pennsylvania in

Bors v. Johnson & Johnson, et al., denied a motion to

dismiss for lack of personal jurisdiction made by

Imerys Talc America, Inc. (“Imerys”).

Imerys has only one contact with Pennsylvania – its

2007 decision to register to do business there as a

foreign corporation. Imerys has not conducted any

transactions in Pennsylvania over the past eleven

years nor does it not own or lease any property

within the state. Notwithstanding this complete

lack of contact with Pennsylvania, Imerys will have

to defend this wrongful death and product liability

action, over 1,200 analogs of which are being

litigated across the country, in Pennsylvania federal

court because it chose to register as a foreign

corporation.

Imerys argued that although the Supreme Court’s

decision in Daimler did not address the issue of

consent to personal jurisdiction by registration to do

business, finding consent by registration would frus-

trate the underlying rationale of Daimler to narrow the

scope of personal jurisdiction.

The Eastern District was not persuaded. First, the Court

found that Pennsylvania’s statute specifically notifies

potential registrants that they will be subject to the

general jurisdiction of its courts. Accordingly it did not

consider any cases where the court analyzed a

registration statute that lacked this type of notice.

Second, the Court distinguished a court’s exercise of

general jurisdiction based on consent from the “at

home” analysis in Daimler, finding that Daimler is

inapplicable to the issue of whether registration

constitutes consent. The Court added, “[w]e do not see

a distinction between enforcing a forum selection

clause waiving challenges to personal jurisdiction and

enforcing a corporation’s choice to do business in the

Commonwealth.”

Notably, the Third Circuit has not yet addressed

whether jurisdiction by consent is still valid and courts

within the Circuit have reached different results on this

issue.

Bors v. Johnson & Johnson, et al., 2016 U.S. Dist. LEXIS

128259 (E.D. Pa. Sept. 20, 2016).

Accident That Occurs While Flying Does Not

Create Personal Jurisdiction in New York

Poonam Sethi, New York

psethi@schnader.com

In Merritt v. Airbus Americas, Inc., the plaintiff flight

attendant was injured during a flight from Boston to

Washington, D.C. when she was struck in the head by a

jump seat that retracted when another flight attendant

stood up while the plaintiff was attempting to store

emergency demonstration equipment. As a result, the

plaintiff suffered severe head trauma, a concussion,

and permanent brain injury.

Defendant Airbus Americas, Inc., a Delaware corpora-tion with its principal place of business in Virginia, and defendant AAI S.A.S., a French company with a

principal place of business in France, are related entities that sell and lease aircrafts and perform

services related to repair and maintenance and technical support of aircrafts operating in all 50 states.

The plaintiff alleged that these defendants negligently designed and installed the jump seats.

Both defendants filed a motion to dismiss for lack of

personal jurisdiction.

In opposition, the plaintiff alleged that the defendants’

Internet advertisements in the United States, not specifically New York, were sufficient to support

personal jurisdiction. The court found this argument unavailing and stated that advertising is insufficient

unless supplemented by business transactions or accompanied by the defendant’s permanence and continuity within New York. The court reiterated its

former stance that Internet advertisements do not

provide an adequate basis for personal jurisdiction.

The plaintiff also alleged that AAI spent billions of dollars within the United States with companies that have offices in New York. The court found this line of

reasoning unavailing since “simply having contact with companies that have offices in New York does not subject [the defendant] to jurisdiction in New York.”

Finally, the plaintiff alleged that the defendants had

knowledge that the aircraft would be operated into

and out of airports in the United States, including

airports in New York.

The court found that the plaintiff failed to establish a “substantial nexus” between her cause of action and

the defendants’ alleged contacts with New York. Accordingly, the complaint was dismissed for lack of personal jurisdiction.

Merritt v. Airbus Americas, Inc., No. 2:15-CV-05937

(E.D.N.Y. Aug 22, 2016). 2016 - U.S. Dist. LEXIS

111572

Don’t Believe the Hype – Part 107 Doesn’t

Make Drone Operations Easy for Everyone

Robert J. Williams, Pittsburgh

rwilliams@schnader.com

The Federal Aviation Administration’s regulations for

commercial operation of unmanned aircraft systems

(“UAS” or “drones”) became effective on August 29,

2016. Known as “Part 107,” these regulations were

expected to put an end to the need for a separate

Certificate of Waiver or Authorization, which

involved a costly and cumbersome application

process and required a public comment period. Part

107 achieved that objective for some operators, but

not all.

Part 107 applies to drones weighing less than 55 lbs,

and authorizes a properly certificated remote pilot

to operate UAS during daylight hours and within

visual line-of-sight. Operations in Class B, C, and D

airspace and within the lateral boundaries of Class E

airspace are prohibited without prior authorization

from Air Traffic Control, and flight over people is

prohibited, unless they are direct participants in the

operation or otherwise are protected from potential

impact with the drone. Many operations fit squarely

within those limitations.

The FAA recognized, however, that Part 107 could

not anticipate the needs of all UAS operators.

Accordingly, Section 107.200(a) of Part 107 expressly

authorizes a waiver of various operating limitations

“if the Administrator finds that a proposed small

UAS operation can safely be conducted under the

terms of that waiver.” In order to obtain a waiver,

the operator must submit to the FAA a written

request containing “a complete description of the

proposed operation and justification that establishes

that the operation can safely be conducted under

the terms of [the requested] waiver.” 14 C.F.R.

§.200(b).

Since August 29, 2016, more than 100 applications

for waivers of various operating limitations (e.g.,

daylight, visual line-of-sight, operation from moving

vehicle, operation over people, etc.) have been

submitted to the FAA, but only 34% of those

applications have been granted. Over 900 applica-

tions for waiver of the airspace restrictions have

been filed, but less than 9% of those applications

have been granted. According to the FAA, most of

those applications were rejected because they did

not include details sufficient to establish that the

requested operations could be conducted safely. In

many cases, the applicants failed to respond to the

FAA’s request for additional information.

The FAA has taken significant steps to facilitate

drone use and integration into the national airspace

system. The denial of an overwhelming majority of

the applications for waivers of Part 107’s operational

and airspace limitations nevertheless demonstrates

continuing uncertainty for operators. In fact, the

FAA recently announced its intention to release re-

vised operating rules that would allow operations

over unprotected and non-participating people

(without a waiver). In these dynamic times, UAS

operators are wise to monitor the regulations and

FAA’s website frequently, and to consult with

appropriate experts for legal and operational advice.

Helicopter Lessor Invokes Federal

Preemption to Escape Liability for State

Law Claims Lee C. Schmeer, Philadelphia

lschmeer@schnader.com

In Escobar v. Nevada Helicopter Leasing LLC, the U.S.

District Court for the District of Hawaii recently held

that summary judgment was proper for a helicopter

lessor facing state law negligence and strict products

liability claims arising out of the deaths of the pilot

and four passengers, where the lessor retained no

actual control over the operational control or

maintenance responsibility for a leased Eurocopter

EC130 B4 helicopter.

The district court relied upon the preemptive effects of 49 U.S.C. § 44112, which by its plain language shields “owners and lessors of aircraft” from liability “for personal injury, death, and property damages unless the secured party, owner, or lessor was ‘in the actual possession or control’ of the aircraft,” finding no evidence that the lessor “was engaged in any concrete manner with the actual physical possession or the actual operational control of the Subject Helicopter after its delivery.”

Important to the court’s holding was the legislative history of Section 44112’s predecessor statutes and relevant case law. Specifically, as early as 1948, Congress expressed its intent to counter an upswell of state laws holding an aircraft owner liable regard-less of the degree to which that owner exerted control over the aircraft. This intent manifested itself in Section 504 of the Civil Aeronautics Act, which was reenacted as the Federal Aviation Act of 1958. When Section 504 was modified in 1959, the Senate Report noted an “extreme shortage of available capital” for aircraft parts and financing, and that the intent of the statute was to expand the protection given to aircraft lessors. The Escobar court also noted that federal courts have uniformly held that Section 44112 preempted state law claims, and that only a minority of states have held to the contrary. The Escobar decision is a useful reminder to defense practitioners of a viable route to challenge state law claims when representing owners or lessors who have little-to-no involvement with the operation or maintenance of their leased aircraft. Escobar v. Nevada Helicopter Leasing LLC, No. 13-

598, 2016 U.S. Dist. LEXIS 95186 (D. Haw. July 21,

2016).

Aviation Group News

Forty Schnader attorneys were selected for inclusion in the 2016 edition of Super

Lawyers, including Aviation Group members Barry Alexander, Richard Barkasy, Emily Hanlon,

Bruce Merenstein, Leo Murphy, Lisa Rodriguez, Ed Sholinsky, Denny Shupe, Jon Stern, Ralph

Wellington and Gordon Woodward.

Corporate America named Schnader’s Aviation Group as one of the best of Aviation Law – USA.

Schnader is named a “Recommended" Pennsylvania law firm in the 2017 edition of Benchmark

Litigation. In addition, Aviation attorneys Denny Shupe and Ralph Wellington were recognized as

"Local Litigation Stars."

2016 Dispute Resolution Awards recognized Schnader as the Best in Products Liability

Litigation - Pennsylvania.

Barry Alexander was quoted in “I didn’t know that was banned on a plane” published in

USA Today.

Bill Janicki was quoted in the article “The Industry Reacts to Part 107,” published on

Inside Unmanned Systems.

Denny Shupe presented at RTI’s AViCON 2016 Aviation Insurance Conference on

September 28 in Stevensville, Maryland.

Schnader’s Aviation Group was named “Aviation – Law Firm of the Year - USA” by

Lawyer Monthly’s Legal Awards.

www.schnader.com/aviation

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Robert J. Williams Partner

Chair

Barry S. Alexander Partner

Vice Chair

Thomas D. Arbogast Counsel

Richard A. Barkasy Partner

Emily J. Hanlon Associate

Jon C. Hughes Partner

William (Bill) D. Janicki Partner

Paul S. Jasper Partner

Lilian M. Loh Associate

Bruce P. Merenstein Partner

Danielle Morrison Associate

Leo J. Murphy Counsel

Julie E. Randolph Associate

C Lisa J. Rodriguez Partner

Carl J. Schaerf Partner

Lee C. Schmeer Associate

Stephen J. Shapiro Partner

Edward J. Sholinsky Associate

J. Denny Shupe Partner

Jonathan M. Stern Counsel

Matthew S. Tamasco Partner

Ralph G. Wellington Partner

Keith E. Whitson Partner

Gordon S. Woodward Partner

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